Howard's End: What The Innovators Are Up Against

As our Innovation Conference kicks off in Christchurch
today, news comes out of Britain that one of its icon
innovators, who runs a private company valued at more than a
NZD $1 billion, is joining the industrial exodus to Asia.
Maree Howard writes.

When he created the wheel-less
wheelbarrow and went on to invent the bagless vacuum
cleaner, James Dyson became an icon of innovative
Britain.

His name has become a brand which is imprinted on
all of the eight million Dyson bagless vacuum cleaners his
company sold since 1993.

Now, though, Dyson has assumed
another persona. Having said he would never abandon the land
that nutured him, Dyson has announced that he plans to close
an assembly line and shift production of all his vacuum
cleaners to the cheaper labour markets of Asia.

Saving
payroll and other costs, the move will eliminate 800 jobs at
his six-year old plant near Malmesbury 160 kilometres west
of London.

"I put $40 million pounds of my money into this
business to try and make manufacturing work here," Dyson
said. " But I have to regard the law of economics. If we are
to survive as a business, we have to go where manufacturing
is economical. I am not betraying anybody."

Last year,
manufacturing in Britain shed 150,000 jobs as its output
shrank by 5.4% and its share of national economic activity
fell below 20%. By contrast service industries, such as
banking, restaurants and call centres, added almost 230,000
jobs.

Britain, once labelled by Napoleon as a nation of
shopkeepers, has now become a nation of shoppers with
consumer spending accounting for 60% of the
economy.

Manufacturers are arguing that the decline of
their businesses is so advanced that it may be irreparable,
leaving the country perilously dependent on a fragile
service economy. Some say their industries have already
reached sub-critical mass from which they cannot
recover.

Many are going or have gone to Asia.

Asia does
not operate as a marketplace in the accepted term. The
product it markets is labour - or more specifically, cheap
labour, preferably cheap female labour.

Strictly speaking,
Asian countries do not export electronics - it is mainly
American, European or Japanese assembly plants located in
Asia, which actually do the exporting.

Asia's cut comes
from the cheap labour it supplies to these corporations and
from outsourcing contracts awarded by the multinational
corporations to local firms.

In order to remain cost
effective, Asian countries also promote migrant labour. The
countries importing the migrant labourers do so in order to
maintain low wages which attracts foreign investors, while
those countries which are exporting their population, do so
in order to alleviate the poverty back home.

For example,
in Malaysia there are about 700,000 foreign workers plus
illegal immigrants, while in Singapore there are 750,000
registered foreign workers.

More than 2,000 Filipino's
leave their country every day for overseas jobs, due to the
lack of jobs in their home country.

With exports to the
U.S. - the importer of last resort - collapsing throughout
Asia, many countries are facing a corresponding collapse in
remittances sent home by the millions of overseas contract
workers.

In the Philippines last year, total remittances
were down to $5.5 billion, way below the $6-8 billion of
previous years.

There are reports coming out of Malaysia
that because of U.S. export markets drying-up, there are
plans to send 300,000 foreign workers home in order to free
up jobs for the local population. This is on top of the more
than 100,000 deported as at November 2001.

The Malaysian
Trade Union Congress, which has half a million members,
called on the private sector to freeze the intake of foreign
workers. About $1.3 billion is repatriated from Malaysia by
foreign workers each year.

Jakarta, in Indonesia, is about
to introduce new laws to prevent poverty-stricken villagers
from across the archipelago from moving to the capital. It
receives around 250,000 newcomers each year.

The current
approach of sending cheap labourers home, to free-up fast
vanishing, barely decent jobs for locals is a solution that
solves nothing.

What is needed, however, is vast amounts
of capital equipment in order to increase the value of
labour rather than the pure free-market approach of finding
even cheaper labour from countries with large populations
such as Bangladesh or Indonesia.

This is the current
environment in which our companies must compete. Those
attending the Innovation Conference in Christchurch had
better be able to innovate.

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